Valuation

Conclusion

The rating on SEMI is neutral plus. Some institutions who want to play the sector may buy SEMI on the IPO at 0.7 times book value.

Related transaction

Samsung Fine Chemicals Co., Ltd., or Samsung Fine Chemicals, and Samsung Electronics Co., Ltd., or Samsung Electronics, have agreed to purchase $100.0 million and $33.9 million (based on an assumed initial public offering price of $14.00 per share), respectively, of SEMI's ordinary shares in separate private placements at a price per share equal to the public offering price.

Business

SEMI is a global leader in the development, manufacture and sale of silicon wafers to the semiconductor industry.

Wafers are used as the base substrate for nearly all semiconductor devices, which in turn provide the foundation for the entire electronics industry.

SEMI’s business was established in 1959 and was known during most of its history as MEMC Electronic Materials, Inc., or MEMC. SEMI has developed a broad product portfolio, an extensive global manufacturing footprint, process technology expertise and supply chain flexibility, while increasing its capital efficiency and maintaining a lean operating culture.

Throughout its over 50 years of operations, SEMI has pioneered a number of semiconductor industry firsts, including the development of the dislocation-free Czochralski, or CZ, silicon crystal growth process and the chemical-mechanical planarization, or CMP, process, as well as the initial production and commercialization of 100mm and 200mm semiconductor wafers.

More recently, SEMI has been a leader in the development of advanced substrates such as epitaxial, or EPI, wafers and wafers for the silicon-on-insulator, or SOI, market, which enable advanced computing and communications applications.

SEMI primarily sells its products to all of the major semiconductor manufacturers in the world, including integrated device manufacturers and pure-play semiconductor foundries, and to a lesser extent, leading companies that specialize in wafer customization.

During 2013, SEMI’s largest customers were Samsung, Taiwan Semiconductor Manufacturing Company, or TSMC, and STMicroelectronics.

SEMI operates facilities in major semiconductor manufacturing regions throughout the world, including Taiwan, Malaysia, South Korea, Italy, Japan and the United States.

SEMI has chosen to locate its manufacturing facilities in regions that offer both low operating costs and close proximity to its customers to facilitate collaboration on product development activities and shorten product delivery times.

Dividend Policy

No dividends are planned.

Intellectual Property

As of March 31, 2014, SEMI had 249 U.S. patents and 509 foreign patents. In addition, as of March 31, 2014, SEMI had 90 pending U.S. patent applications and approximately 239 pending foreign patent applications.

5% stockholders

SunEdison 100%

Use of proceeds

SEMI expects to net $90.2 million from its IPO. Proceeds are allocated as follows:

$16.8 million will be used to provide a portion of the cash necessary to repay in full the intercompany notes issued to SunEdison in connection with the asset transfers contemplated as part of the Formation Transactions;

$11.1 million will be used to repay existing third party indebtedness relating to the semiconductor materials business owed to a bank by its Japanese subsidiary;

and $62.3 million will be retained as cash on its balance sheet, which will provide SEMI with additional liquidity and flexibility in its capital structure.

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